Gulf banks could increase profits by an estimated $50 million (Dh184m) to $150m by improving the quality of their customer service, a new survey has revealed.
Banks in the six-nation Gulf Co-operation Council have been growing assets and profits at double-digit rates – compared to the three to five per cent rates common in more developed countries – but AT Kearney's survey suggests there is a serious gap in the lenders' customer service.
According to the survey, roughly half of UAE nationals consider their customer service experience neutral or negative, and more than 90 per cent of Western expatriates consider the service below par.
This difference in perception underscores the quality of customer service between the GCC banks and those in more developed markets. In the US, for example, only 24 per cent of consumers are negative or neutral about customer service and 76 per cent are satisfied.
A satisfied customer is less likely to leave, more open to cross-selling and more likely to recommend the bank, AT Kearney said.
A retail banking satisfaction study by JD Power and Associates calculated that for every one million customers, a bank in the US can generate an additional $1 billion in deposits if it turns just five per cent of its customers into highly satisfied customers.
Keeping new customers as satisfied as existing ones was also considered a valuable method to boost profits, with the survey concluding that a five per cent increase in customer retention could increases profitability by 20 to 80 per cent.
"Satisfaction in the branch, on the phone and online can and does have a direct impact on revenues. Put it this way: a mid-size GCC bank with world-class customer service could increase profits anywhere from $50m to $150m a year," said Alexander von Pock, manager of the Financial Institutions Group of AT Kearney and co-author of the study.
AT Kearney identified four main concerns for the dissatisfaction in customer service: lack of skilled resources and excessive red tape; lack of product transparency; lack of general responsiveness; and lack of coordinated multi-channeling offering.
The most common type of bad customer service singled out by the analysis was unresponsiveness as customers complained that banks were simply failing to follow up on customer requests in a timely manner.
GCC banks offer contact forms on their websites to collect details on potential or current customers to answer specific questions. One third of customer-negative services involved customers never receiving the promised callback, or receiving it after more than three days.
A response on the same day would put a GCC bank on par with international best practice.
GCC banks were also criticised for failing to provide quality advisors, with complaints that advisors were often ill equipped and unable to assist customers choose the right product.
The survey claimed some advisors lack basic financial skills such as understanding the difference between nominal and real interest rates, placing the blame on inadequate training and low retention rates for banking employees at a time when financial services are drawing on a limited talent pool.
The Gulf country banks were also criticised for lack of product transparency, facing accusations of not explicitly informing customers of charges or of the different prices that apply when their current account balance falls below a minimum, and for not providing price lists such as product brochures.
By contrast, in developed markets, transparent product information is often required by law, and the availability of product brochures is standard. Issues of red tape were another matter the report believed to be limiting and a contrast to developed markets. Many GCC banks require a salary certificate to open a current account, information that is typically required when applying for credit applications in developed banking markets.